Thursday, April 4, 2013

The presumptive correction begun a week ago has further to go, since yesterday's weakness violated a midpoint support.  The 'D' target to which it corresponds lies at 82.38, which if achieved will equate to a pullback of 1.1%.  Alternatively, bulls would be back in charge instantly if they can muster a pop today exceeding the external peak at 82.94 labeled in the chart.

Even though T-bonds are the most heavily manipulated vehicle we track, they've shown in the past that they are not oblivious to Hidden Pivot dynamics. Thus, the 146^11 rally target shown in the accompanying chart could prove useful in determining the extent to which true market forces, such as they are, are abetting loose monetary policy. In the past, dips to important correction targets have invariably triggered strong interventions. To look at it another way, we can infer that whenever long-term rates reach a threshold where investors might start getting skittish, the Fed can be expected to step in forcefully. Rallies, on the other hand, pose no such challenge, since they mainly allow the Fed to determine how much breathing room it's got. In the present context, this means that an easy move above 146^11 would imply that conditions remain psychologically favorable for yet more, effortless easing.  More bullish still for monetary psychology would be an uncorrected extension of the rally past the 147^08 'external' peak recorded on the last day of 2012. Were that to occur, it would tend to corroborate bulls' argument that stocks are headed significantly higher. One final note:  There is a hidden resistance at 145^27 (A=140^24 on /14; B=143^31 on 3/19) that for simplicity's sake I did not include in the chart. An easy move through it would presage not only an effortless leap to 146^11, but, presumably, an assault on 147^08 straightaway. _______ UPDATE (10:47 p.m. EDT): Today's surge pushed the futures past our target by 11 ticks, implying that they are likely to get past January's 147^08 peak without a struggle. This would refresh the bullish energy of the weekly chart, with potential consequences that I have noted above.